Cash Abolition. Opportunities and Risks on an International Level

Table of Contents

1. Introduction

2. Basics of cash

2.1 Origin of cash

2.2 Definition of book money

2.3 Functions of cash

2.4 Advantages and disadvantages of cash

3. Current worldwide developments

3.1 Current debates in the European Union

3.1.1 Discussion on the abolition of larger banknotes and small coins

3.1.2 Introduction of cash payment caps

3.2 Important information in an international context

4. Opportunities and goals of a cash abolition

4.1 Officially stated reasons

4.1.1 Organised crime (such as terrorism, drug trafficking and money laundering)

4.1.2 Undeclared work and tax evasion

4.1.3 Cost savings

4.1.4 Other Benefits

4.2 Possible unofficial reasons and backgrounds

4.2.1 Enforceability of negative interest rates

4.2.2 Boosting consumption

5. Requirements for a possible abolition of cash

6. Possible risks and side effects of cash abolition

6.1 Emergence of shadow currencies

6.2 Restriction of citizens' freedom

6.3 Security risks of cashless payment systems

6.4 Self-control and consumer behaviour of citizens

7. Alternatives to cash

7.1 Pure bank money - Digital payment systems using the example of mobile payment

7.2 The sovereign money initiative in Switzerland

7.3 Virtual currencies using the example of Bitcoins

8. Future role of cash as a means of payment

Research Objectives and Themes

This paper examines the theoretical and practical feasibility of abolishing cash, analyzing the potential economic and societal impacts of a transition to a fully digital payment system. It investigates whether the stated objectives—such as combatting illegal activities and enhancing monetary policy through negative interest rates—can be achieved, while simultaneously evaluating the significant risks to privacy, personal freedom, and technical security.

• The role of cash in modern economies and its fundamental functions.
• Arguments for and against the abolition of cash, focusing on crime reduction and monetary policy flexibility.
• Technical and political requirements necessary for a successful transition to cashless systems.
• Analysis of innovative digital alternatives, including mobile payment systems and virtual currencies like Bitcoin.

Excerpt from the Book

Summary of Chapters

1. Introduction: Outlines the theoretical scope of the paper, focusing on the debate regarding the abolition of cash and the exploration of alternatives.

2. Basics of cash: Provides a historical overview of money, from barter to fiat systems, and defines the role of cash versus book money.

3. Current worldwide developments: Reviews the status quo of international payment habits and political debates surrounding banknote abolition and payment caps.

4. Opportunities and goals of a cash abolition: Analyzes the official and unofficial justifications for a cashless society, including crime control and monetary policy stimulation.

5. Requirements for a possible abolition of cash: Details the technical, legal, and infrastructural prerequisites required to successfully eliminate cash.

6. Possible risks and side effects of cash abolition: Explores the dangers of a cashless society, such as increased data transparency, security threats, and potential loss of consumer self-control.

7. Alternatives to cash: Evaluates potential substitutes like digital mobile payments, the Swiss sovereign money initiative, and virtual currencies like Bitcoin.

8. Future role of cash as a means of payment: Concludes that while cash will likely play a diminishing role, its total abolition should remain a voluntary process in a free market economy.

Keywords

Cash, book money, digitalization, payment systems, money laundering, negative interest rates, monetary policy, shadow economy, mobile payment, Bitcoin, virtual currency, consumer behavior, anonymity, financial system, Bretton Woods.

Frequently Asked Questions

What is the core focus of this publication?

The work focuses on the theoretical and practical feasibility of abolishing cash, assessing the arguments for a transition to a purely digital economy and the associated risks.

What are the primary themes discussed?

Key themes include the economic function of cash, political efforts to restrict cash usage, the potential for monetary policy improvement, and the evaluation of digital alternatives.

What is the central research question?

The paper examines whether the abolition of cash is practically possible and under what conditions such a major societal change could be implemented.

Which methodologies are employed in this analysis?

The research relies on an international review of current payment data, economic theory, and case studies of countries that have adopted or are considering digital-first payment strategies.

What is covered in the main body of the text?

The text covers the history of money, the debate on official objectives for cash abolition (e.g., stopping illegal activity), the risks of a cashless world, and specific alternatives like mobile payments and virtual currencies.

Which keywords best describe this study?

The most relevant keywords include: cash, book money, digitalization, payment systems, negative interest rates, monetary policy, and virtual currency.

What role do central banks play in the transition to a cashless society?

Central banks are crucial as they manage monetary policy; however, the transition to a cashless system risks reducing their independence if they become solely dependent on government-allocated funds.

How does the author view the potential of Bitcoin as a replacement for traditional money?

The author views Bitcoin as a prominent virtual currency with technical advantages like decentralization, but notes that its current price volatility and niche usage make it an unsuitable replacement for national currencies at present.

What does the "sovereign money initiative" in Switzerland propose?

It proposes returning the right to create money entirely to the Swiss National Bank, prohibiting commercial banks from creating book money via lending.